Mark Newman

Mark Newman inquired about SanDisk's strategy regarding long-term agreements (LTAs) in a rapidly rising price environment, seeking clarity on the balance between locking in prices and benefiting from market appreciation. He also asked about the company's long-term supply-demand outlook and any plans to increase supply.

Answer

CEO David Goeckeler highlighted the strength of SanDisk's portfolio, innovation (BiCS8, Enterprise SSD, consumer products), and improved product mix driving results. He explained that LTAs aim for supply assurance and aligning long-term growth with sustained demand at attractive financials, emphasizing the market's demand-driven nature. CFO Luis Visoso added that customers across markets are seeking LTAs, and SanDisk is thoughtfully defining metrics like agreement length, price, quantities, and prepayment to ensure value accretion. David reiterated consistent CapEx and mid-to-high teens bit growth plans, stressing the need for long-term demand visibility beyond quarterly transactions.

Mark Newman asked about SanDisk's strategy regarding long-term agreements (LTAs), including their impact on pricing and the proportion of business shifting to longer-term commitments. He also inquired about the long-term supply-demand balance and any plans to increase supply.

Answer

David Goeckeler (Chairman and CEO) highlighted strong portfolio innovation, improved product mix, and favorable supply-demand dynamics driving results. He explained that LTAs aim to secure supply assurance for customers and ensure fair returns, especially given accelerating data center demand. Luis Visoso (EVP and CFO) added that SanDisk is thoughtfully defining LTA metrics like length, price, quantities, and prepayments to ensure value creation. David reiterated current CapEx and bit growth plans, emphasizing the need for long-term demand visibility beyond quarterly transactions.

Mark Newman sought deeper clarity on SanDisk's supply-demand dynamics, specifically the proportion of shorter-term versus longer-term contracts and how pricing inflects given these contract structures. He also requested an update on the High-Bandwidth Flash (HBF) roadmap and potential timelines.

Answer

EVP and CFO Luis Visoso stated that SanDisk currently has very few volume and price commitments extending beyond a quarter, but strategic customers are now proactively seeking longer-term supply assurances. Chairman and CEO David Goeckeler confirmed that the HBF timeline remains on track, with memory expected in late 2026 and controllers in 2027. He noted ongoing customer conversations for HBF use cases in both edge and cloud, expressing optimism about the technology and its applications.

Mark Newman sought clarity on the proportion of Sandisk's shorter-term versus longer-term contracts, especially given the current significant inflection in pricing, and how this impacts the benefits of long-term agreements. He also requested updates on the High Bandwidth Flash (HBF) roadmap and potential timelines for its market introduction.

Answer

EVP and CFO Luis Visoso stated that Sandisk currently has very few volume and price commitments extending beyond a single quarter, but strategic customers are initiating conversations for longer-term agreements. Chairman and CEO David Goeckeler reiterated the HBF timeline announced last quarter: memory in late 2026 and the controller in 2027. He noted ongoing customer conversations for inference applications in both edge and cloud, expressing optimism about the technology and its use cases.

Mark Newman asked about the potential for more significant price increases, similar to those seen in NAND flash, as long-term agreements (LTAs) roll off, and requested an update on the trajectory of HAMR mix.

Answer

CEO Dave Mosley explained that HAMR mix was constrained on 3 TB per platter due to full factories and a strategic focus on the 4 TB per platter product, which will be ramped aggressively, primarily targeting high-capacity points. Regarding pricing, he reiterated that as LTAs roll off, new products with constrained supply dictate pricing, and flat to slightly up pricing is possible depending on demand, with strong demand leading to better future planning.

Mark Newman questioned if there's an opportunity for more significant price increases, similar to NAND flash, as long-term agreements (LTAs) roll off. He also asked for an update on the trajectory of HAMR mix that Seagate had previously outlined.

Answer

CEO Dave Mosley explained that Seagate constrained 3 TB per platter HAMR production due to factory fullness and the upcoming 4 TB per platter product, which will be ramped aggressively. He reiterated that pricing depends on demand, with flat to slightly up being the current expectation, and noted that customers are seeking more predictable future planning due to strong demand. He also mentioned HAMR demand is primarily at high capacity points.

Mark Newman asked about Seagate's plans to add capacity given tight supply and the adoption of HAMR technology, including any upside or downside to previous HAMR rollout projections.

Answer

Seagate's Chair and CEO, Dave Mosley, explained that capacity additions focus on product transitions to higher exabyte drives rather than unit capacity. CFO Gianluca Romano added that the qualification of five major cloud customers on HAMR is accelerating profitability, exceeding initial expectations.

Mark Newman asked about Seagate's supply-demand balance, plans for adding capacity, potential supply chain bottlenecks, and the adoption trajectory of HAMR technology, including any upside or downside to previous projections.

Answer

Dave Mosley, Chair and CEO, explained that Seagate's strategy for adding capacity focuses on increasing exabyte capacity through product transitions to higher-capacity HAMR drives, rather than adding unit capacity. Gianluca Romano, CFO, added that five global CSPs are now qualified on HAMR, contributing to better-than-expected revenue and profitability, and the HAMR ramp continues as planned.

Mark Newman questioned the conservatism of the $0.30 EPS impact from memory costs, given it's mostly a second-half impact and HP's ability to pass through costs via pricing. He also asked if the significant memory price increases would impact product mix, potentially changing average specs sold, and affecting the AI PC dynamic, which typically requires higher specifications.

Answer

Karen Parkhill, CFO, reiterated HP's prudent approach to guidance, aiming for high confidence in meeting and potentially exceeding expectations, acknowledging the $0.30 impact is conservative. Enrique Lores, CEO, added that HP would prioritize units with higher margins, expecting the impact to be more pronounced in entry-level, price-sensitive segments. He confirmed the conservative approach given the full-year guidance and the rapid changes in the market.

Mark Newman questioned if the $0.30 EPS impact from memory prices, primarily in the second half, seemed conservative given HP's ability to pass through pricing. He also asked if the significant memory price movements would impact product mix, potentially changing average specs or affecting the AI PC dynamic, which typically requires higher specifications.

Answer

CFO Karen Parkhill reiterated a prudent approach to guidance, aiming for high confidence in meeting or exceeding expectations, and noted HP's proven track record in managing such challenges. CEO Enrique Lores confirmed that HP would prioritize units with higher margins, expecting entry-level segments to be more impacted by price sensitivity. He emphasized the conservative approach given the full-year guidance, the expected second-half impact, and the rapid unfolding of market conditions.

Mark Newman inquired about NVIDIA's potential vertical integration and its impact on Dell's AI server strategy, as well as seeking color on the changing mix of AI server orders, specifically the portion from enterprise customers.

Answer

COO Jeff Clarke affirmed Dell's continued differentiation in large-scale AI deployments, emphasizing rack-level value-add, engineering skill, and services, despite NVIDIA's actions. He noted a significant shift towards GB300 in the backlog and growing opportunities in sovereign and enterprise segments within the five-quarter pipeline.

Mark Newman inquired about the potential impact of NVIDIA's vertical integration efforts on Dell's AI server supply chain and strategy, and requested more color on the changing mix of AI server orders, particularly the proportion from enterprise customers.

Answer

Jeff Clarke (COO, Dell Technologies) stated that Dell remains excited about new technologies and believes its value-add at the rack and solution level (L11 and beyond) will continue to differentiate it, especially in complex, large-scale deployments. He emphasized Dell's engineering skill, rapid deployment, and high uptime (99%+) as key competitive advantages, which he believes will only grow with increasing power densities. He noted a significant shift towards GB300 in the $18.4 billion backlog and continued strong pipeline growth from sovereigns and enterprises.

Mark Newman sought clarification on the historical context of the $13 billion in new orders, asking how this figure compares to previous quarters' backlogs, and inquired about the company's long-term gross margin target, specifically if the previously mentioned 14%-17% range is still intact or has been revised due to market changes.

Answer

David Weigand, CFO, stated that it is not the company's practice to discuss backlog generally, but the $13 billion in new orders was mentioned due to its impact on current and December quarters. Regarding gross margins, David Weigand acknowledged the previous 14%-17% guide from 2021 but noted that the market has changed, and while they aim for double digits, they will provide clearer guidance when possible. Charles Liang, Founder, President, and CEO, added that double-digit gross margins are still in their plan, especially with a focus on DCBBS and enterprise accounts, though it might take longer while servicing large CSPs.

Mark Newman from Bernstein sought more color on the $13 billion in new orders, asking for historical context on backlog size and how this figure compares to previous quarters. He also inquired about Super Micro's long-term gross margin target, specifically if the previously mentioned 15%-16% range is still intact but pushed out, or if it's no longer a viable target given current market dynamics.

Answer

David Weigand, CFO, stated that it is Super Micro's practice not to discuss backlog generally, but the $13 billion in new orders and design wins were mentioned due to their impact on current and upcoming quarters. Regarding gross margins, Mr. Weigand acknowledged the 2021 guide of 14%-17% but noted that the market has changed significantly with new dynamic platforms. He indicated that the company would provide clearer margin guidance when possible, expressing a desire to return to double-digit margins. Charles Liang, Founder, President, and CEO, added that achieving double-digit gross margins would be 'easy' if focusing solely on DCBBS and enterprise accounts, but the company is also keen to support large-scale CSPs. He confirmed that double-digit gross margins are still in the plan, though it may take a little longer.

Mark Newman requested clarity on the breakdown between Software and Consulting for IBM's growing AI book of business, noting it was previously around 80/20. He also asked for an explanation regarding Consulting's book-to-bill ratio being below one for two consecutive quarters, despite a trailing 12-month ratio above one, and why this shouldn't be a concern, especially with 30% of signings being longer-duration AI projects.

Answer

Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, addressed the Consulting book-to-bill, noting that while signings were down 5% due to lower large deal renewal volume, the quality of signings improved significantly with double-digit net new business penetration and over 300 new clients year-to-date. He highlighted that GenAI, comprising 22% of backlog, 30% of signings, and 12% of revenue, is inflecting growth, leading to confidence in Q4 Consulting growth and a return to market growth levels in 2026. Regarding the AI book of business breakdown, Mr. Kavanaugh stated that of the over $9.5 billion total, over $7.5 billion is in Consulting and almost $2 billion in Software, remaining 'pretty damn close to that 20/80 overall.' He also provided an update on Red Hat's performance, noting 12% growth in the quarter, with OpenShift bookings up nearly 40% and Ansible bookings up 20%, despite headwinds from consumption-based services and RHEL reverting to its model.

Mark Newman, Managing Director and Senior Analyst at Bernstein, requested a specific breakdown of IBM's $9.5 billion AI book of business between software and consulting, noting a previous 80-20 split. He also expressed concern about consulting's book-to-bill ratio being below one for two consecutive quarters, asking for an explanation and reassurance, especially given that AI signings, which are believed to be longer duration, constitute around 30% of signings.

Answer

Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, clarified that the generative AI book of business is over $9.5 billion, with over $7.5 billion in consulting and almost $2 billion in software, maintaining a composition close to the 80/20 split. Regarding consulting, Kavanaugh acknowledged that signings were down 5% for the quarter, driven by lower large deal renewal volume, which he argued has less revenue realization. He emphasized the "quality of signings," noting tremendous improvement in net new business penetration (double-digit year-over-year) and over 300 new clients year-to-date. He highlighted that the backlog of $31 billion is healthy, growing 4%, with the best erosion in years, indicating strong client commitment. Kavanaugh stated that GenAI, constituting over 22% of backlog, 30% of signings, and 12% of revenue, is inflecting growth, leading to confidence in consulting growth in Q4 and returning to market levels in 2026. He also provided detailed insights into Red Hat's performance, noting 12% growth, with OpenShift bookings up nearly 40% and ARR up mid-30s, and Ansible bookings up 20%, expecting solid double-digit growth for Red Hat in Q4 and acceleration into 2026.